Prorating Real Estate Taxes in Michigan Selected for 2007 Francis Moss Literary Award Michigan Assessors Magazine Michigan Property Tax Prorations Tax Proration Guidelines and Practices If you want to have a fun argument, begin a discussion on prorating property taxes. I guarantee you, you'll evenutally be swamped by a number of opinions, each being promoted passionately as 'the' true way to prorate taxes. In part, this is because Michigan law is very flexible on how taxes may be prorated. This calculator is designed to estimate the real estate tax proration between the home buyer & seller at closing. This proration calculator should be useful for annual, quarterly, and semi-annual property tax proration at settlement (calendar & fiscal year). Simply close the closing date with the drop down box. Payment will be due. Explain how the real estate tax proration credit works. When closing in early summer, remind borrowers who have an escrow account. Real estate contracts are the place where we get down to the nitty-gritty of the real estate tax problem for closings. Most of the common real estate forms call for a proration of the real estate taxes based on the best information available to the parties. Oh, by the way proration means: 'To make an arrangement on a basis of proportional distribution. To divide or distribute proportionately.' (The American College Dictionary, Page 972, 1960) Buyers and Sellers can agree to prorate taxes in any way they'd like. There are also common ways to prorate real estate taxes which vary depending upon local custom. By examining practices throughout the state, you'll discover taxes are commonly prorated as though paid in 'advance'. They are commonly prorated as 'paid in arrears'. They are commonly prorated as: part in advance and part in arrears. In some cases buyers and sellers even agree to no tax proration. During my tenure in an assessor's office, we were called on from time-to-time to settle tax proration disputes. So, what follows are the instruction I would provide to those involved in such arguments. • A buyer and seller may agree (create a contract) to prorate taxes in any way they'd like; if such an agreement exists it should be followed. • Michigan's Property Tax Act, (Act 206, 1893; M.C.L. 211.2 et seq) provides specific instructions on how to prorate taxes at a closing when no proration agreement exists between the buyer and seller. A quote from the act follows later, but basically, taxes are prorated as though paid in advance with the seller being responsible for all tax levies made prior to, but not including, the date of closing. The buyer must pay all future tax levies (and any taxes that might actually be levied on the date of closing). Host booter. Create Account. If a levy occurs pursuant to the statute, there is an assumption that a proration must occur for any taxes levied within the twelve months preceding the closing date. The taxes are to be considered as being levied for a twelve month period beginning from the levy date. Prorations must be made under this section with two time periods for each levy: 1) A time period during which the seller had possession, which runs from the levy date to and including the day before closing; and 2) a time period during which the buyer has possession, which which runs from the date of closing through and including the last day of the twelve months period following the levy date. The buyer is not responsible for any part of the real estate tax between the levy date and the date of the real estate transaction 'closing'. The buyer is responsible for that part of each tax from the closing date to and including the last day of the twelve month tax period. Latest dstv decoder. This effectively is a proration of taxes in advance. I am aware of a fellow who was truly quite intelligent, but who suffered from overconfidence in matters of property tax prorations. Many years ago, he made his first One Million Dollar purchase (some commercial real estate). The transaction took place in a county where the customary practice was to prorate taxes as though paid in arrears. The purchase agreement did not address the issue of tax prorations. This fellow assumed that the proration would be in arrears, which as you will see later, created a financial advantage to him. Unfortunately, the seller had competent counsel in matters of taxation. So at the closing, the portion of Michigan's law which deals with proration of real estate taxes in purchases between private parties was pointed out. The quite intelligent fellow immediately was enrolled in the school of hard knocks and coughed up $15,000 in cash to pay for his tuition. Cannot backup iphone software too old memes. That is, instead of collecting money from a property tax proration at closing, he paid money for the proration of taxes. The difference between what he would have received and the amount he ended up paying was $15,000. An expensive lesson even today. • The term 'levy date' means the date a tax becomes due and payable.
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